thank you for your time and assistance.
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david ingram replies:
The chances of her being 'caught' are slim BUT if she was only
gone for 12 1/2 months, without the intent of being gone for a long time, she is
taxable in Canada and should report the income on her Canadian returns for 2007
and 2008. She would claim a foreign tax credit for the taxes paid to
Japan on lines 431 and 433 of her Canadian return. Not reporting the
income and getting caught by the CRA can be 'very' expensive.

I am making
this decision because I am assuming that she kept her provincial medical plan,
her provincial driver's licence and did not set up non-resident bank accounts
and get a Japanese driver;s licence, etc.

The following dissertation from
my web site explains whatr someone must do to escape Canadian income
tax. My opinion might be different with other
information. For instance, if she gave up her medical, got a Japanese
driver's licence and intended to be gone for 5 years and is only coming back
because something went wrong, she would not be taxable in Canada on her Japanese
income.

So what are the rules?

Well, to leave Canada for tax purposes, you must give up clubs, bank
accounts, memberships, driving licences, provincial health care plans, family
allowance payments (if you are a returning resident, you can continue to get
Family Allowance out of the country), your car, and furniture. You can keep a
house here as an investment and rent it out, but it must be rented on lease
terms of a year or more. And you MUST have an agent sign an NR6 for you (see
example). This NR6 has the Canadian Resident AGENT ** guarantee the Canadian
Government that if YOU do not pay your tax to Canada, the AGENT WILL. Even after
fulfilling the foregoing, the Canadian government can still tax you or "try" to
tax you on your income out of the country. If you are being paid by a Canadian
Company, they can quite often succeed.

Even though you can collect family allowance out of the
country, don't! One client's wife found out that she could get family allowance
out of the country if she said they were coming back to Canada. She got some
$3,000 of family allowance and cost the family some $80,000 in income tax when
they came back to Canada from Brazil. I will never forget the husband's
expression when he found out why he had been reassessed and I will never forget
his wife's explanation. She said he was a skinflint and never gave her any
money. The total episode cost them their house.

** The "agent" referred to above can be a friend,
relative, or a business such as ours. We charge a minimum of $40.00 per month to
be an "AGENT" for an NR-6 filing. This $480 per year is "in addition" to any
other fees but "well worth it" of course. It stops your mother, father, brother,
next door neighbour or ex-best-friend from being plagued by paperwork they do
not understand.

OUT OF CANADA AND RESIDENT - IN CANADA AND
NON-RESIDENT

It is possible to be physically "in Canada" and be
treated as a Non-Resident and it is possible to be out of the country for seven
years, or never have even lived in Canada, but wanted to, and be taxed as a
Canadian resident as the following three cases show. In case you missed it, the
reason for the different rulings is the "INTENT" of the parties
involved.Wolf Bergelt intended to leave Canada.David MacLean was only working out of the country.He
still maintained a residence and could not ever become a resident of Saudi
Arabia anyway. Dennis Lee "wanted" to live in Canada.

In 1986, Wolf Bergelt won non-resident status before
Judge Collier of the Federal Court, even though he was only out of the country
for four months and his family stayed behind to sell his house. He had given up
his memberships, kept only one bank account and rented an apartment in
California until his house in Canada was sold. Four months after his move, his
company advised him that he was being transferred back to Canada. Judge Collier
said his move was a permanent (although short) move and he was a non-resident
for tax purposes for those four months.

In 1985, David MacLean lost his claim for non-residence
status even though he was gone for seven years. He kept a house and investments
in Canada and returned a couple of times a year to visit parents. He had even
been to the Tax Office and received a letter on January 29, 1980 stating that
his Canadian Employer could waive tax deductions because he was a non-resident.
However, he did not advise his banks, etc. that he was a non-resident so that
they would withhold tax, he did not rent his house out on a long term lease and
he did not do any of the things that makes a person a "NON-RESIDENT". Judge
Brule of the Tax court of Canada said that he thought Mr. MacLean had stumbled
on the non-resident status by chance rather than by design. In other words, to
become a non-resident of Canada, you must become a bone fide resident of another
country.As a rule, only a Muslim born in Saudi Arabia to
Saudi Arabian parents can become a Saudi Arabian citizen.The
best that David MacLean can hope for is that he has a Saudi Arabian temporary
work permit.

In other words, when a person leaves a place, they
usually leave and establish a new identity where they are because the "new
place" is where they live now. Trying to "look" like a non-resident is not the
same as "BEING" a non-resident - think about it.

In 1989, Denis Lee won part but lost most of his claim for
non-resident status. He was a British Subject who worked on offshore oil rigs.
He maintained a room at his parents house in England and held a mortgage on his
ex-wife's house in England. For the years 1981, 82 and 83 he did not pay income
tax anywhere. in 1981 he married a Canadian and she bought a house in Canada in
June of 1981. On September 13, 1981, he guaranteed her mortgage at the bank and
swore an affidavit that he was "not" a non-resident of Canada. [As I have said
in the capital gains section of this book, bank documents will get you every
time.] During this time he had a Royal Bank account in Canada and the Caribbean
but no Canadian driver's licences or club memberships, etc.

Judge
Teskey said:

"The question of residency is one of fact and depends on
the specific facts of each case. The following is a list of some of the indicia
relevant in determining whether an individual is resident in Canada for Canadian
income tax purposes. It should be noted that no one of any group of two or three
items will in themselves establish that the individual is resident in Canada.
However, a number of the following factors considered together could establish
that the individual is a resident of Canada for Canadian income tax
purposes":

- past
and present habits of life;

-
regularity and length of visits in the jurisdiction asserting residence;

- ties
within the jurisdiction;

- ties
elsewhere;

-
permanence or otherwise of purposes of stay;

-
ownership of a dwelling in Canada or rental of a dwelling on a long-term basis
(for

example, a lease of one or more years);

-
residence of spouse, children and other dependent family members in a
dwelling

maintained by the individual in Canada;

-
memberships with Canadian churches, or synagogues, recreational and social
clubs,

unions and professional organizations (left out mosques);

-
registration and maintenance of automobiles, boats and airplanes in
Canada;

- holding
credit cards issued by Canadian financial institutions and other
commercial

entities including stores, car rental agencies, etc.;

- local
newspaper subscriptions sent to a Canadian address;

- rental
of Canadian safety deposit box or post office box;

-
subscriptions for life or general insurance including health insurance through
a

Canadian insurance company;

- mailing
address in Canada;

-
telephone listing in Canada;

-
stationery including business cards showing a Canadian address;

-
magazine and other periodical subscriptions sent to a Canadian address;

"The Appellant claims that he did not want to be a
resident of Canada during the years in question. Intention or free choice is an
essential element in domicile, but isentirely absent in
residence."

Even though Dennis Lee was denied residency by
immigration until 1985 (his passport was stamped and limited the number of days
he could stay in the country) and he did not purchase a car until 1984, or get a
drivers licence until 1985, Judge Teskey ruled that he was a non-resident until
September 13, 1981 (the day he guaranteed the mortgage and signed the bank
guarantee) and a resident thereafter.

My point is made. Residency for "TAX PURPOSES" has nothing to do with
legal presence in the country claiming the tax. It is a question of fact. My
thanks to Judge Teskey for an excellent list. The italics are mine and refer to
the items which I usually see people trying to "hold on to" after they leave and
are trying to become non-residents. No single item will make you a resident, but
there is a point where the preponderance of "numbers" leap out and say, "He /
She is a resident of Canada, no matter what he / she says."

The case above is not unusual in any way. It is a fairly
typical situation in my office.

In 1990, John Hale was taxed as a resident on $25,000 of
directors fees he had received from his Canadian Employer and on $125,000 he
received for exercising a share stock option given to him when he had been a
resident of Canada (the option, not the stock). Judge Rouleau of the Federal
Court ruled that section 15(1) of the Great Britain / Canada Tax Convention did
not protect the $125,000 as it was not "salaries, wages, and other
remuneration". It was, however a benefit received by virtue of employment within
the meaning of section 7(1)(b) of the act.

Even a car you do not own can make you a resident as the
next sailor found out.

In 1988, FrederickReed was claimed by the Canadian
Government as one of their own. He lived on board ship and shared an apartment
with a friend in Bermuda but only occasionally. He also stayed with his parents
in Canada when visiting his employer in Halifax. Judge Bonner of the Tax court
ruled that he could not claim his place of employ or the ship as his residence
and just because he did not have a fixed abode, did not make him a non-resident.
He was also the beneficial owner of a car in Canada which even though of minor
consequence, served to add to his Canadian Residency. He had in fact borrowed
money from a credit union to buy the car, even though it was registered in his
father's name. He had maintained his Canadian Driver's licence as well.

An interesting case in June, 1989 involved Deborah and
James Provias who left Canada in October of 1984. They had sold a multiple unit
building to James' father on September 21, 1984 but the statement of adjustments
did not take place until December 1, 1984. They tried to write off rental losses
and a terminal loss against other income as `departing Canadians'. Judge
Christie of the Tax Court ruled that they had left before the sale and were not
entitled to the terminal loss or another capital loss as these could only be
applied against income earned in Canada from October 13, 1984 (the day they
left) to November 30, 1984 (the day before the sale) and there was no income,
only a rental loss.

But June, 1989 was a good month for Henry Hewitt. He had
been a non-resident living in Libya for four years and received some back pay
after returning to Canada. DNR tried to tax him on the money but Judge Mogan of
the Tax Court came to the rescue. He ruled that although Canadians were usually
taxable on money when received, that assumed that the money itself was taxable
in Canada, which was not true in this case.

In 1989, James Ferguson lost his claim for non-residency
status but from the information, it didn't stand a chance anyway. He had been in
Saudi Arabia on a series of one year contracts for four years. His wife remained
employed in Canada, and he kept his house, car, driver's licence, union
membership, and master plumber's licence. Judge Sarchuk ruled that he had always
intended to return to Canada and was a resident.

A similar situation involved John and Johnnie M. Eubanks
in the United States. He was working on an offshore oil rig in Nigeria with a
Nigerian work permit and attempted to claim non-resident status for the purposes
of exempting the foreign earned income exclusion. His wife was in the United
States at all times and because he worked 28 days on and 28 days off, he
returned to the U.S. for his rest periods using 4 days for travel and 24 days
for rest with his family. He did not spend any 330 day period (out of a year) in
Nigeria and only had a residency permit for the purposes of working in Nigeria.
Judge Scott ruled he was a resident of the U.S. and taxed him some $20,000 with
another $6,000 penalties and interest.

The Tax departments in Canada and the U.S. issue
Interpretation Bulletins and Information Circulars and Guidance Pamphlets. These
documents sometimes get people in trouble because the individual reads the good
part and doesn't pay any attention to the exceptions. The following case ran
contrary to a Guidance Pamphlet issued by the IRS.

On and Off-shore Oil rigs were involved with William and
Margaret Mount and Jesse and Mary Wells. William and Jesse worked in the United
Arab Emirates. However, they kept their homes and families in Louisiana and kept
their driver's licences in Louisiana and voted in Louisiana. No evidence was
shown that they had tried to settle in The United Arab Emirates. Judge Jacobs
turned down claimed exclusions of approximately $75,000 each.

There isn't any question about what oil rig people talk
about on oil rigs. It has to be "how to beat the tax man". Unfortunately, they
all seem to think it is easy. Another such story follows.

In 1989, Clarence Ritchie found out that bona fide
residence means just what it says. You cannot be a non-resident of the U.S. for
tax purposes if you are not a bona fide resident of another country. He was
working on the Mobil Oil Pipeline in Saudi Arabia and although when he left he
was married with a couple of kids, by the time he returned permanently, he was a
happily divorced man. Judge Scott ruled that though he did not have an abode in
the United States, he had not established one in Saudi Arabia and therefore was
not entitled to the foreign earned income exclusion which requires you to be
away for 330 days out of 365. He had worked a 42 days on, 21 days off schedule
and usually returned to the U.S. for his days off although he did spend time in
Tunisia, England, Italy and Greece.

On a final note, as explained on page 143 of the "PINK"
17th edition of my ULTIMATE TAX BOOK, it is possible to have three countries
after you for tax. If you are thinking of taking a job because a recruiter told
you the money is tax free, think twice and check three times with competent
individuals about what the rules "really are". No government likes giving up the
right to tax its citizens.

DEBT SECURITIES - BANK ACCOUNTS

Non-residents of Canada with investments in Canada are
subject to a 25% non-resident withholding tax on any money paid to them while
they are out of the Canada. Therefore, if they have $10,000 in the Bank of
Montreal and they live in Argentina, The Bank of Montreal must withhold 25 cents
out of every dollar of interest paid to the account. Most tax treaty countries
such as Great Britain, Germany, the United States, and Australia have a
reciprocal agreement with Canada that limits the withholding to 15%. So we have
the anomaly that a Canadian with money in a bank in the U.S. has no withholding
but an American with money in a Canadian Bank has 15 cents out of every dollar
withheld as a foreign withholding tax. The American would report his interest on
schedule A of his 1040 tax return and claim the tax withheld as a foreign tax
credit on a form 1116.

David Ingram wrote:

On January 29, 2008, David Ingram wrote:

It is very unlikely that blind or unexpected email to me
will be answered. I receive anywhere from 100 to 700 unsolicited
emails a day and usually answer anywhere from 2 to 20 if they are not from
existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get
answered first. I also refuse to be a slave to email and do not look at it
every day and have never ever looked at it when I am out of town.
e bankruptcy expert US
Canada Canadian American Mexican Income Tax service and
help

However, I regularly search for the words"PAYING CUSTOMER" and
always answer them first if they did not get spammed out. For the last two
weeks, I have just found out that my own email notes to myself have been spammed
out and as an example, as I wrote this on Dec 25, 2007 since June 16th, my
'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have
actually looked at and deleted and I have actually answered 1234 email questions
for clients and strangers without sending a bill. I have also put aside
847 messages that I am maybe going to try and answer because they look
interesting. -e
bankruptcy expert US Canada Canadian American Mexican Income Tax
service and help

Therefore, if an email is not answered in 24 to 48 hours,
it is likely lost in space. You can try and
resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you
will have to phone to make an appointment. Gillian Bryan generally accepts
appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday
VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.
david ingram
expert US Canada Canadian American Mexican Income Tax
service and help.david ingram's US / Canada ServicesUS / Canada
/ Mexico tax, Immigration and working Visa SpecialistsUS / Canada Real
Estate SpecialistsMy Home office is at:

Calls welcomed from 10 AM to 9 PM 7 days a week
Vancouver (LA) time - (please do not fax or phone
outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income
Tax service help.

Disclaimer: This question has been answered without detailed
information or consultation and is to be regarded only as general
comment. Nothing in this message is or should be construed as advice
in any particular circumstances. No contract exists between the reader and the
author and any and all non-contractual duties are expressly denied. All
readers should obtain formal advice from a competent and
appropriately qualified legal practitioner or tax specialist
for expert help, assistance, preparation,
or consultation in connection with personal or
business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
e bankruptcy expert US
Canada Canadian American Mexican Income Tax service and
help.

David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.

Phone
consultations are $450 for 15 minutes to 50 minutes (professional hour). Please
note that GST is added if product remains in Canada or is to be returned to
Canada or a phone consultation is in Canada. ($472.50 with GST if in
Canada)expert US Canada Canadian American Mexican Income
Tax service and help.

This is not intended to be definitive but in
general I am quoting $900 to $3,000 for a dual country tax
return.

$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.

$1,200 would be the same with one rental

$1,300 would be the same with one business no
rental

$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.

$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out

$1,700 would be for two people with income from two
countries

$3,000 would be all of the above and you moved in
and out of the country.

This is just a guideline for US / Canadian
returns

We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $200.00 up.

With a Rental for $400, two or three rentals for
$550 to $700 (i.e. $150 per rental) First year Rental - plus
$250.

A Business for $400 - Rental and business likely
$550 to $700

And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.

Moving in or out of the country or part year
earnings in the US will ALWAYS be $900 and up.

TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.

8891 forms are generally $50.00 to $100.00
each.

18 RRSPs would be $900.00 - (maybe amalgamate a
couple)

Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.

Catch - up returns for the US where we use the
Canadian return as a guide for seven years at a time will be from $150 to
$600.00 per year depending upon numbers of bank accounts, RRSP's, existence of
rental houses, self employment, etc. Note that these returns tend to be
informational rather than taxable. In fact, if there are children
involved, we usually get refunds of $1,000 per child per year for 3 years.
We have done several catch-ups where the client has recieved as much as $6,000
back for an $1,800 bill and one recently with 6 children is resulting in over
$12,000 refund.

This is a guideline not etched
in stone. If you do your own TDF-90 forms, it
is to your advantage. However, if we put them in the first year, the computer
carries them forward beautifully.

David Ingram
expert income tax service and immigration help and preparation of US Canada Mexico non-resident and cross border returns
with rental dividend wages self-employed and royalty foreign tax credits family
estate trust trusts income tax convention treaty advice on
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